Not a single valley
Imagine that you are a Russian IT company that wants to open its office in America and enter the American market. What is the first location comes to mind? Silicon Valley! It is believed that it is simply created for this.
But how fair is this? Macroscop founder Artem Razumkov visited 11 technology hubs in various parts of the United States, and now, for several reasons, we question that Silicon Valley is an ideal place for any IT company.
Photo from apalych.com
All roads lead to the Valley ...?
The vast majority of great IT companies that immediately come to mind (Google, Apple, Facebook, Uber) are located in Silicon Valley. So, practice confirms that the Valley is the place where IT companies are developing effectively? And there are not so many exceptions to this, and, apparently, that’s why everyone strives so much there.
Indeed, Silicon Valley is a unique ecosystem! If you are doing an IT start-up, then in the Valley you will find the largest amount of various capital: venture funds, business angels, etc. There is no more such concentration anywhere! If you need tools for growth, then again, most of them here: accelerators, technology centers, etc. And what practically everyone marks is the speed of work. There are some unique rules of the game in Silicon Valley, and everything happens very quickly. Perhaps, here is the fastest process of working on IT products and the growth rate of IT companies.
So, if an IT company chooses a place to “land” in the USA, does everything point to Silicon Valley? Many do just that. When a Russian company with a development team in Russia has the task of entering the American market, based on the foregoing, the question of where to do this does not even arise. "Of course, Silicon Valley!" - They say everything (almost all).
But let's look closer
Let there be an IT company from Russia, whose products are sold in dozens of countries around the world, but not in America. The company makes a B2B product, sells it to distributors and system integrators and wants to enter the US market. Let's try to understand how suitable for her Silicon Valley.
It is planned to sell to distributors and integrators, which, for example, are located in different parts of the United States. Accordingly, if you open a sales office in Silicon Valley, form a team that will be there, by telephone, negotiate with potential partners and buyers, and sometimes go for personal negotiations, what do we get?
1. The high cost of maintaining the team.
People have to pay a salary that will allow them to live in the Valley. And living in California, and especially in Silicon Valley, is not cheap. To rent a small room in San Francisco costs from $ 1,700 / month. Rent an apartment - from $ 2300 / month. The cost of living in Silicon Valley is very high (one of the highest in America, about 3-4 times higher than in the middle of the American continent), and people’s wages should be appropriate. Forming a sales team in the Valley, be prepared to pay it many times more.
2. The time difference.
How convenient is the sales office in Silicon Valley in terms of time zones? The valley is located on the west coast, and the time difference, for example, with New York, is 3 hours. That is, when you are negotiating at 14 o'clock local time, in New York and on the east coast it is already 17 hours and the working day ends. Communicating from the Valley, it is not very convenient to capture other US regions.
3. Logistics.
How good is Silicon Valley a good transportation hub? Frankly, this is one of the weakest points of San Francisco. There are few flights and often to get somewhere, you need to do additional connections. And to fly, for example, to the east coast, you need to spend 6 hours. And this is quite a lot.
The position of the aircraft over the American continent, Flightradar24 service.
But at least in San Francisco with flights, everything is not very good, there is one advantage that can outweigh all the logistical drawbacks: there is a special room for yoga at the airport.
So we leave 3 points of justice at your discretion :)
So, forming a sales team in Silicon Valley, we get a team in the most expensive place (and keep it expensive there), which has great limitations on the possibilities of telephone (and other) communications with other parts of America because of the difference in time zones, which, with all this, flying to negotiations is long and inconvenient.
Given all this, the impression is completely opposite to the first.
On top of that, the “benefits” of the Valley in the form of capital, accelerators, technology centers, a unique talent environment in the field of development will not be useful to you. They will not work for you. And it turns out that all that we get is an expensive team, which is in an expensive place and sells to other poor states, and with time constraints and very inconvenient transport logistics.
Exceptions, of course. There are examples when placing a sales team in the Valley would be the most appropriate solution. The most obvious is when you sell to California itself and Silicon Valley itself. It’s right to work where you sell, plus it’s cheaper from the point of view of logistics - you don’t have to spend extra money on travel and travel.
And if we are talking about sales across America, then placing a team in the Valley would be a strange decision.
It is quite another thing when a company is founded there. In the Valley is very fertile ground for the growth of startups. Look at those great IT companies that came to mind at the very beginning: both Google and Facebook were founded in Silicon Valley. The core of such companies is development. And the decision center should be where the development is. At the same time, these companies open sales offices in different parts of America and the world, and precisely for reasons of economy. By the way, great IT companies based outside the valley are also missing. For example, Microsoft and Amazon from Seattle.
Summarizing: it is economically and logistically justified to be in the Valley to those companies that sell it. Or companies that have any specific needs to be there. Everything else is just a tribute to fashion or the desire to live specifically in this place of one of the company's founders, but not for some objective business reasons.
And if the universal statement that Silicon Valley is the cradle of innovation, and it’s logical and good to found a company there, should not be doubted, then the statement that Valley is a great place for American soft-landing companies that were founded elsewhere, and whose decision-making center and development are located elsewhere is questionable. And in most cases, in our opinion, this is the wrong place, and the choice in his favor leads to overpayments and getting a low result.
Where to go?
Seeing the situation with his own eyes and realizing all this, Artyom visited most of the technological hubs in the United States to understand which place then fits better than the Valley. And here are some thoughts on this.
Anyway, for other technology sites, Silicon Valley is a kind of icon, and each of them tries to be more or less like it. Even informal names have something in common: in Los Angeles - Silicon Beach, in Portland - Silicon Forest, in Philadelphia - Great Valley.
One of the alternatives to the Valley, free from the above disadvantages, is Chicago. This is a very large and very inexpensive city, it is located in the center of the continent and is an excellent transport hub. In addition, Chicago is good if you want to try to debug sales - due to its size, there are almost all buyers in it. Therefore, it is possible to validate the processes and check the sales model.
Many Russian companies choose New York. It is located on the east coast, which means that the time difference with Russia is not so great, it is a huge city and a huge transport hub. But along with Silicon Valley is one of the most expensive places in America. But in New York there are options to reduce costs: you do not have to live in Manhattan, you can live in less expensive Brooklyn or New Jersey, changing the cost reduction to your time that you spend on the road. And transport in New York is a separate story. It seems that you can quickly get from Jersey City to Manhattan (about 10 km in total), but in practice it sometimes takes almost an hour. The subway runs to Brooklyn, but the subway in New York is a separate song, and train jams are often formed. But for people who are willing to change their time to save,
Cities differ not only in the cost of living and time zones, but also in a certain business mentality: the western coast (California, Silicon Valley) is an image of a risky, to some extent reckless approach to business management, a center of risk, innovation and insane ideas; Eastern (New York) -conservative, more balanced and strict, this is a financial center, where people in ties make serious decisions on classical models. This can also be taken into account. And choose New York, if you have a startup in the field of finance and it requires conservative money. Or Valley, if you want to attract some "crazy" investment.
Silicon Valley is unique!
And this we do not question. But choosing a place, for example, for a sales office, you need to understand where it will be most convenient for you to sell to where you are not aiming. If you plan to sell throughout the country, you need to find a place:
But this is all determined after you understand who you are selling to, where all these people are located, and how to get to them. Of course, if buyers are in a particular state, then an office is located there. But if we consider the whole of America, then it is better to be guided by the principles outlined above.
Do not think that Silicon Valley is a universal place that suits everyone. Look for your place under your specific conditions.
But how fair is this? Macroscop founder Artem Razumkov visited 11 technology hubs in various parts of the United States, and now, for several reasons, we question that Silicon Valley is an ideal place for any IT company.
Photo from apalych.com
All roads lead to the Valley ...?
The vast majority of great IT companies that immediately come to mind (Google, Apple, Facebook, Uber) are located in Silicon Valley. So, practice confirms that the Valley is the place where IT companies are developing effectively? And there are not so many exceptions to this, and, apparently, that’s why everyone strives so much there.
Indeed, Silicon Valley is a unique ecosystem! If you are doing an IT start-up, then in the Valley you will find the largest amount of various capital: venture funds, business angels, etc. There is no more such concentration anywhere! If you need tools for growth, then again, most of them here: accelerators, technology centers, etc. And what practically everyone marks is the speed of work. There are some unique rules of the game in Silicon Valley, and everything happens very quickly. Perhaps, here is the fastest process of working on IT products and the growth rate of IT companies.
So, if an IT company chooses a place to “land” in the USA, does everything point to Silicon Valley? Many do just that. When a Russian company with a development team in Russia has the task of entering the American market, based on the foregoing, the question of where to do this does not even arise. "Of course, Silicon Valley!" - They say everything (almost all).
But let's look closer
Let there be an IT company from Russia, whose products are sold in dozens of countries around the world, but not in America. The company makes a B2B product, sells it to distributors and system integrators and wants to enter the US market. Let's try to understand how suitable for her Silicon Valley.
It is planned to sell to distributors and integrators, which, for example, are located in different parts of the United States. Accordingly, if you open a sales office in Silicon Valley, form a team that will be there, by telephone, negotiate with potential partners and buyers, and sometimes go for personal negotiations, what do we get?
1. The high cost of maintaining the team.
People have to pay a salary that will allow them to live in the Valley. And living in California, and especially in Silicon Valley, is not cheap. To rent a small room in San Francisco costs from $ 1,700 / month. Rent an apartment - from $ 2300 / month. The cost of living in Silicon Valley is very high (one of the highest in America, about 3-4 times higher than in the middle of the American continent), and people’s wages should be appropriate. Forming a sales team in the Valley, be prepared to pay it many times more.
2. The time difference.
How convenient is the sales office in Silicon Valley in terms of time zones? The valley is located on the west coast, and the time difference, for example, with New York, is 3 hours. That is, when you are negotiating at 14 o'clock local time, in New York and on the east coast it is already 17 hours and the working day ends. Communicating from the Valley, it is not very convenient to capture other US regions.
3. Logistics.
How good is Silicon Valley a good transportation hub? Frankly, this is one of the weakest points of San Francisco. There are few flights and often to get somewhere, you need to do additional connections. And to fly, for example, to the east coast, you need to spend 6 hours. And this is quite a lot.
The position of the aircraft over the American continent, Flightradar24 service.
But at least in San Francisco with flights, everything is not very good, there is one advantage that can outweigh all the logistical drawbacks: there is a special room for yoga at the airport.
So we leave 3 points of justice at your discretion :)
So, forming a sales team in Silicon Valley, we get a team in the most expensive place (and keep it expensive there), which has great limitations on the possibilities of telephone (and other) communications with other parts of America because of the difference in time zones, which, with all this, flying to negotiations is long and inconvenient.
Given all this, the impression is completely opposite to the first.
On top of that, the “benefits” of the Valley in the form of capital, accelerators, technology centers, a unique talent environment in the field of development will not be useful to you. They will not work for you. And it turns out that all that we get is an expensive team, which is in an expensive place and sells to other poor states, and with time constraints and very inconvenient transport logistics.
Exceptions, of course. There are examples when placing a sales team in the Valley would be the most appropriate solution. The most obvious is when you sell to California itself and Silicon Valley itself. It’s right to work where you sell, plus it’s cheaper from the point of view of logistics - you don’t have to spend extra money on travel and travel.
And if we are talking about sales across America, then placing a team in the Valley would be a strange decision.
It is quite another thing when a company is founded there. In the Valley is very fertile ground for the growth of startups. Look at those great IT companies that came to mind at the very beginning: both Google and Facebook were founded in Silicon Valley. The core of such companies is development. And the decision center should be where the development is. At the same time, these companies open sales offices in different parts of America and the world, and precisely for reasons of economy. By the way, great IT companies based outside the valley are also missing. For example, Microsoft and Amazon from Seattle.
Summarizing: it is economically and logistically justified to be in the Valley to those companies that sell it. Or companies that have any specific needs to be there. Everything else is just a tribute to fashion or the desire to live specifically in this place of one of the company's founders, but not for some objective business reasons.
And if the universal statement that Silicon Valley is the cradle of innovation, and it’s logical and good to found a company there, should not be doubted, then the statement that Valley is a great place for American soft-landing companies that were founded elsewhere, and whose decision-making center and development are located elsewhere is questionable. And in most cases, in our opinion, this is the wrong place, and the choice in his favor leads to overpayments and getting a low result.
Where to go?
Seeing the situation with his own eyes and realizing all this, Artyom visited most of the technological hubs in the United States to understand which place then fits better than the Valley. And here are some thoughts on this.
Anyway, for other technology sites, Silicon Valley is a kind of icon, and each of them tries to be more or less like it. Even informal names have something in common: in Los Angeles - Silicon Beach, in Portland - Silicon Forest, in Philadelphia - Great Valley.
One of the alternatives to the Valley, free from the above disadvantages, is Chicago. This is a very large and very inexpensive city, it is located in the center of the continent and is an excellent transport hub. In addition, Chicago is good if you want to try to debug sales - due to its size, there are almost all buyers in it. Therefore, it is possible to validate the processes and check the sales model.
Many Russian companies choose New York. It is located on the east coast, which means that the time difference with Russia is not so great, it is a huge city and a huge transport hub. But along with Silicon Valley is one of the most expensive places in America. But in New York there are options to reduce costs: you do not have to live in Manhattan, you can live in less expensive Brooklyn or New Jersey, changing the cost reduction to your time that you spend on the road. And transport in New York is a separate story. It seems that you can quickly get from Jersey City to Manhattan (about 10 km in total), but in practice it sometimes takes almost an hour. The subway runs to Brooklyn, but the subway in New York is a separate song, and train jams are often formed. But for people who are willing to change their time to save,
Cities differ not only in the cost of living and time zones, but also in a certain business mentality: the western coast (California, Silicon Valley) is an image of a risky, to some extent reckless approach to business management, a center of risk, innovation and insane ideas; Eastern (New York) -conservative, more balanced and strict, this is a financial center, where people in ties make serious decisions on classical models. This can also be taken into account. And choose New York, if you have a startup in the field of finance and it requires conservative money. Or Valley, if you want to attract some "crazy" investment.
Silicon Valley is unique!
And this we do not question. But choosing a place, for example, for a sales office, you need to understand where it will be most convenient for you to sell to where you are not aiming. If you plan to sell throughout the country, you need to find a place:
- where everything is convenient from the point of view of time zones (and this, preferably, somewhere in the middle of the continent, to negotiate with the west and the east as effectively as possible);
- where you can fly to any point quickly (and this is also in the middle of the continent);
- where there is a sufficient number of specialists of the appropriate level for your team;
- where costs (for labor, office rent, etc.) will be acceptable.
But this is all determined after you understand who you are selling to, where all these people are located, and how to get to them. Of course, if buyers are in a particular state, then an office is located there. But if we consider the whole of America, then it is better to be guided by the principles outlined above.
Do not think that Silicon Valley is a universal place that suits everyone. Look for your place under your specific conditions.